Case 4:11-cv-04639 Document 1

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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION VAPOR POINT, L.L.C.; KEITH NATHAN; and KENNETH MATHESON Civil Action No. _______________

Plaintiffs, v. ELLIOTT MOORHEAD; and NANOVAPOR FUELS GROUP, INC., Defendants.

ORIGINAL COMPLAINT AND JURY DEMAND Plaintiffs Vapor Point, L.L.C. (Vapor Point), Keith Nathan (Nathan), and Kenneth Matheson (Matheson) (collectively Plaintiffs) file their original complaint for damages and correction of the named inventor of U.S. Patent No. 7,727,310 pursuant to 35 U.S.C. 256, fraud, unjust enrichment, tortious interference, misappropriation of trade secrets, and violation of the Texas Theft Liability Act against Defendants Elliott Moorhead (Moorhead) and NanoVapor Fuels Group, Inc. (NanoVapor) (collectively Defendants) as follows: I. 1. PARTIES

Vapor Point is a limited liability company organized and existing under the laws

of the State of Louisiana with its principal place of business at 1400 South 16th Street, La Porte, Texas, 77571. 2. 3. Nathan is an individual who is a resident of the State of Texas. Matheson is an individual who is a resident of the Kingdom of Jordan.

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4.

On information and belief, Moorhead is an individual who is a resident of the

State of California, and may be served with process by delivering a copy of the summons and complaint to 106 Arbolado Boulevard, Watsonville, California 95076. 5. On information and belief, NanoVapor is a corporation organized and existing

under the laws of the State of Delaware with its principal place of business at 18135 Delta Estates Court, Cypress, Texas 77429, and may be served with process by delivering a copy of the summons and complaint to its registered agent, The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. II. 6. JURISDICTION AND VENUE

This Court has jurisdiction over this action pursuant to 28 U.S.C. 1331, 1332,

1338, and 1367. 7. Venue is proper in this judicial district pursuant to 28 U.S.C. 1391(b) and (c). III. 8. BACKGROUND

In 2006, Defendants attempted to but were unsuccessful in developing a method

and system for removing volatile organic compounds (VOC) from fuel tanks. Defendants were using Moorheads deployed technology, which attempted to utilize nozzle configurations to atomize nano-particulates inside the cavities of various tanks. At this time, Moorhead utilized his own enzyme-type chemical. 9. Defendants sought outside expertise to assist them in reengineering their misting

system and bringing it market. They turned to an old colleague, Nathan, who they had known since 2002 because of his work in the area of removing VOCs from a variety of enclosures. They also turned to Matheson, because of his prior work in the field and Moorheads relationship with him dating back to early 2003. Defendants set out to form a relationship or partnership with Nathan and Matheson to use their skill sets and experience to develop a method and system to
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remove VOCs from fluids and gases. The potential relationship found its genesis in Nathan and Mathesons skill and knowledge, but was to end in a developed system marketed and distributed through NanoVapor. Ultimately, neither the relationship nor the partnership developed, as Defendants never fulfilled their promises of securing funding or actually having technology or skills to assist Nathan and Matheson in their development efforts. 10. In June 2006, Nathan met with Moorhead in Waco, Texas, where Moorhead

offered Nathan a distribution and marketing opportunity to promote Moorheads misting system along the Texas and Louisiana Gulf Coast. 11. Later, in September 2006, Nathan suggested Moorheads misting systems

performance be tested to confirm the claims made by Moorhead. While Nathan requested that Moorhead provide him with standard test data to back up the claims of Moorheads misting system, Moorhead could not and did not produce the data. Nathan had no choice but to conduct the test himself. Nathan began sourcing test equipment to perform the tests at his League City, Texas office. Prior to commencing the testing, Moorhead offered Nathan a position within NanoVapor contingent upon Moorhead securing third party financing. Nathan declined this arrangement, but expressed his openness to reconsider the offer if Moorhead met certain financial objectives. Moorhead never met those objectives. 12. Nathan proceeded with his testing. The testing results proved Moorheads claims

regarding his misting technology to be unverifiable. Moorheads misting technology simply did not work and Moorhead did not have, or would not produce, any test results or development notebooks to prove otherwise. 13. Immediately thereafter, Nathan began his own independent experimentation with

the process of VOC removal. Prior to the work and testing Nathan performed with Moorhead, he

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and Matheson had jointly pursued using a counter-flow technology to remove VOCs. Using their prior independent work as a springboard, Nathan began development of his sintered material/biomass/biodiesel technology (the Confidential Information), which Nathan later disclosed to Moorhead. 14. On December 22, 2006, Moorhead filed a provisional patent application,

application number 60/871,766 (the 766 Application), naming himself as the sole inventor of the Nathans developed technology disclosed in the Confidential Information. 15. Nathan had no knowledge of the scope or content of the 766 Application before

or after it was filed. He never reviewed the 766 Application or anything related to it that would have disclosed to him that his Confidential Information was being used by Moorhead in a patent application. While he knew that Moorhead had filed a provisional patent application, Moorhead explained to him that it was unrelated to Nathans Confidential Information. 16. Around February 2007, Don Alford (Alford) met with associates of NanoVapor

to discuss using his skills to market the future embodiment of Nathans confidential VOC removal technology. 17. Later, in July 2007, Matheson met with associates of NanoVapor to discuss how

his skills could be used to help further the technology being developed by Nathan. Defendants wanted Matheson to take Nathans technology from the laboratory to the field. 18. Matheson signed a reciprocal nondisclosure agreement on July 10, 2007. The

agreement was to become effective on the date on which it was signed by NanoVapors CFO, Gary Wilkinson ("Wilkinson"). However, Wilkinson never executed the agreement. 19. During their working relationship with Defendants from around June 2007 until

December 2007, Nathan and Matheson reduced to practice a method for removing and

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recovering

unwanted

contaminants

from

fluids

and

gases

using

sintered

material/biomass/biodiesel technology (the Invention) and, in conjunction with Vapor Point, are currently engaged in the production and the implementation of the Invention. The

contaminated fluids and gases are typically from maintenance, operations, processing, and other sources within the oil and gas upstream, midstream and downstream sectors, and other industries such as power generation, pulp and paper manufacturing. 20. Before Nathan, Matheson, and Alford began considering working with

NanoVapor, Wilkinson informed them that NanoVapor was in the process of obtaining additional funding from outside investors and would retroactively compensate them for of their services. Nathan, Matheson, and Alford declined Nano Vapors offer, but they would reconsider the offer after Defendants fulfilled their promise of obtaining funding for the trios work. However, Nathan, Matheson, and Alford insisted the offered compensation would have to be coupled with equity in the company. NanoVapor never acquired the additional funding and therefore never came to an agreement regarding employment or partnership with Nathan, Matheson, or Alford. 21. Defendants were to provide the financing for the VOC removal technology now Alford was continuing to work on a

being jointly developed by Nathan and Matheson. marketing plan for the VOC removal system. 22.

After months of their waiting for Defendants to secure the promised financing, it

became clear to Nathan, Matheson, and Alford that NanoVapor would not succeed in securing outside financing. Because of Nano Vapors failure to fulfill its financing promises neither Nathan, Matheson, nor Alford received any compensation from Defendants. Thereafter, on

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December 18, 2007, Nathan, Matheson, and Alford terminated their relationship with Defendants. 23. On the same day Nathan, Matheson, and Alford terminated their relations with

NanoVapor, Moorhead filed a non-provisional patent application, application number 11/959,416 (the 416 Application), again claiming Nathan and Mathesons development work as his own and claiming priority to the 766 Application. Despite not actually being an inventor or assisting in the development of the technology disclosed and claimed in the 416 Application, Moorhead named himself as sole inventor on the 416 Application. 24. After learning of the 416 Application, attorney Edward Oliver sent a demand

letter on January 13, 2007, to Moorhead and NanoVapor demanding abandonment of the patent application and the return of Plaintiffs Confidential Information. Likewise, on January 17th, 2007 attorney Barry Rabon issued a similar letter to Moorhead and NanoVapor. 25. Despite suspecting Moorhead was attempting to patent their VOC removal system

and method, at no time during the prosecution of the 416 Application was Nathan or Matheson ever made expressly aware that Moorhead had applied for a patent covering their VOC removal development technology. 26. The 416 Application issued as U.S. Patent No. 7,727,310, titled "System and

Method for Removing Volatile Vapors from Containers" (the 310 Patent) on June 1, 2010 and is assigned to NanoVapor. 27. Nathan and Matheson have assigned their entire right, title, and interest in and to

the Invention to Vapor Point. COUNT I CORRECTION OF NAMED INVENTOR OF U.S. PATENT 7,727,310 PURSUANT TO 35 U.S.C. 256 28. Paragraphs 1-27 are incorporated as if fully set forth herein.
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29.

Nathan and Matheson made individual, conceptual contributions to the

invention(s) claimed in the 310 Patent. 30. 310 patent. 31. Moorhead made no individual, conceptual contribution(s) to the invention(s) of Nathan and Matheson are the true inventors of the invention(s) claimed in the

the 310 Patent. 32. Moorhead, acting with deceptive intent, did not include Nathan and Matheson as

inventors on the 416 Application. 33. The exclusion of Nathan and Matheson as inventors on the 416 Application

occurred without the deceptive intent of Nathan and Matheson. 34. Due to his deceptive intent, Moorhead was named as the sole inventor on the 416

Application and on the 310 Patent. 35. As a result of Defendants actions, Plaintiffs have been damaged by Defendants

and continue to suffer damages. 36. Pursuant to 35 U.S.C. 256, Nathan and Matheson seek a certificate of correction

naming them as the inventors of the 310 patent, and removing Moorhead as an inventor of the 310 patent. COUNT II COMMON-LAW FRAUD 37. 38. Paragraphs 1-36 are incorporated as if fully set forth herein. Defendants represented to Nathan and Matheson that if they disclosed the

Invention to them and provided their expertise and know-how to produce and implement the Invention, that Defendants would compensate Nathan and Matheson for such disclosure and for their efforts upon receiving funding from third-parties from which Defendants asserted they were

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seeking such funding. Further, Defendants had represented that Plaintiffs Nathan, Matheson and Alford would receive additional compensation for their effort in the form of an ownership interest in NanoVapor. Plaintiffs relied on these representations to their detriment. 39. This representation was material and false. Despite disclosing the Invention to

Defendants and working with Defendants to produce and implement the Invention, Nathan and Matheson were never compensated by Defendants. 40. When Defendants made these representations they knew them to be false. They

further made the representations recklessly, as positive assertions, and without knowledge that they would ever in fact receive the third-party funding from which compensation to Nathan and Matheson would be made. 41. Defendants made the representations with the intent that Nathan and Matheson

would disclose the Invention to them. 42. 43. Nathan and Matheson relied on Defendants representations. As a result of Defendants actions, Nathan and Matheson have been damaged by

Defendants and continue to suffer damages. COUNT III FRAUD BY NONDISCLOSURE 44. 45. Paragraphs 1-43 are incorporated as if fully set forth herein. Moorhead filed the 416 Application naming himself as the sole inventor, when in

fact Nathan and Matheson were the true inventors. The 416 Application ultimately issued as the 310 Patent. Moorhead then assigned the 310 Patent to NanoVapor. Defendants concealed from, and failed to disclose the 410 Application and the assignment of the 310 Patent to Nathan and Matheson.

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46.

Because Nathan and Matheson are the true inventors of the 310 Patent,

Defendants had a duty to disclose the 416 Application to them. 47. The act of filing the 416 Application and the subsequent assignment of the 310

Patent to NanoVapor were material facts. 48. Defendants knew Nathan and Matheson did not know about the 416 Application.

Because of Defendants concealment, Nathan and Matheson had no way to discover that the 416 Application had been filed. 49. Defendants were deliberately silent with regard to filing the 416 Application and

assigning the 310 Patent to NanoVapor, and had a duty to disclose these facts to Nathan and Matheson. 50. By failing to disclose these facts to Nathan and Matheson, Defendants intended to

prevent Nathan and Matheson from contesting the inventorship of the 416 Application and the 310 Patent with the USPTO. 51. 52. Nathan and Matheson relied on Defendants nondisclosure and concealment. As a result of Defendants actions, Plaintiffs have been damaged by Defendants

and continue to suffer damages. COUNT IV UNJUST ENRICHMENT 53. 54. Paragraphs 1-52 are incorporated as if fully set forth herein. Defendants have retained, or are in the process of retaining, for their own use and

benefit, Plaintiffs rights in and to the 310 Patent, the Invention, and any proceeds therefrom. 55. As a direct and proximate result of Defendants acts, Plaintiffs have been

damaged and Defendants have been unjustly enriched. If Defendants are allowed to continue to

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retain rights in and to and/or practice the invention(s) of the 310 Patent, they will continue to be unjustly enriched to the further detriment of Plaintiffs. COUNT V TORTIOUS INTERFERENCE 56. 57. Paragraphs 1-55 are incorporated as if fully set forth herein. Defendants actually knew, or had reason to know, of the patentability and value

of the Invention, by virtue of the existence of Defendants relationship and dealings with Plaintiffs. 58. Moorhead filed the 416 Application, for which Nathan and Matheson were the

true inventors, with the USPTO, falsely representing that he was the sole inventor, when in fact, he was not an inventor at all. Upon information and belief, NanoVapor, as assignee of the 310 Patent, was complicit in the filing. 59. The act of filing the 416 Application with the USPTO and obtaining the 310

patent placed a cloud on the title to Nathan and Mathesons invention and their property rights in and to the invention and the 310 Patent, which constitutes tortious interference with Plaintiffs rights to exclude others from making, using, offering to sell, selling, or importing the invention. 60. There was a reasonable probability that Plaintiffs would have produced a system

and implemented a method in accordance with the 310 Patent, and exercised their property rights in and to the invention claimed by the 310 Patent so as to exclude others from making, using, offering to sell, selling, or importing the invention. 61. Defendants independently tortious and unlawful acts have proximately caused

injury to Plaintiffs. 62. As a result of Defendants actions, Plaintiffs have been damaged by Defendants

and continue to suffer damages.

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COUNT VI MISAPPROPRIATION OF TRADE SECRETS 63. 64. Paragraphs 1-62 are incorporated as if fully set forth herein. Plaintiffs owned trade secrets, namely the Invention. Plaintiffs had every

intention of keeping the Invention secret and took steps to protect this secret, such as pursuing a nondisclosure agreement with Defendants. From the first time Plaintiffs dealt with Defendants until the last time they spoke with them, they informed Defendants that the Invention was confidential and that they expected Defendants to treat it as confidential. 65. Defendants obtained these trade secrets through improper means, in violation of a

confidential and contractual relationship, and after notice that any disclosure of the trade secrets was improper. 66. Defendants used the trade secrets to the exclusion of Plaintiffs, namely in the

procurement of the 310 Patent. 67. As a result of Defendants actions, Plaintiffs have been damaged by Defendants

and continue to suffer damages. COUNT VII TEXAS THEFT LIABILITY ACT 68. 69. Paragraphs 1-67 are incorporated as if fully set forth herein. Defendants conduct constitutes a violation of the Texas Theft Liability Act, TEX.

CIV. P. & REM. CODE 134.001-134.005, as Defendants conduct constituted a theft and communication of trade secrets. 70. Plaintiffs had certain possessory rights to property, specifically the above

referenced trade secrets, stolen by Defendants. With full knowledge of Plaintiffs superior possessory rights, Defendants unlawfully appropriated, secured, and stole the subject property.

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71.

By filing a patent application for Nathan and Mathesons invention, naming

Moorhead as the sole inventor on the 416 Application, and assigning the 310 Patent to NanoVapor, Defendants unlawfully appropriated Plaintiffs property. Defendants unlawful

taking was accomplished with the intent to deprive Plaintiffs of their rights in and to their property, and caused Plaintiffs to suffer damages as a result of the theft. IV. 72. Plaintiffs request a trial by jury. Plaintiffs pray that this Court enter an Order and Final Judgment as follows: a) a certificate correcting the inventorship of the 310 Patent, substituting Nathan and Matheson as the inventors of the 310 Patent and removing Moorhead as an inventor of the 310 Patent, pursuant to 35 U.S.C. 256; an assignment of all rights in and to 310 Patent to Vapor Point; that Plaintiffs be awarded their damages, Defendants profits, and/or statutory damages; that Plaintiffs be awarded exemplary or punitive damages; that Plaintiffs be awarded their attorneys fees; that Plaintiffs be awarded their costs; that Plaintiffs be awarded pre- and post-judgment interest; and that Plaintiffs be awarded all other relief to which they are entitled. JURY DEMAND

b) c) d) e) f) g) h)

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Respectfully submitted, By: /s/ Michael D. Pegues Michael D. Pegues Texas Bar No. 15730600 Michael.Pegues@bgllp.com Jason A. Wietjes Texas Bar No. 24042154 Jason.Wietjes@bgllp.com R. Casey ONeill Texas Bar No. 24079077 Casey.O'Neill@bgllp.com

BRACEWELL & GIULIANI, LLP 1445 Ross Avenue Suite 3800 Dallas, Texas 75202 (214) 468-3800 (214) 468-3888 (Fax) ATTORNEYS FOR PLAINTIFFS VAPOR POINT, L.L.C., KEITH NATHAN, AND KENNETH MATHESON Dated: December 30, 2011.

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